Friday, November 12, 2010
As a follow up to my previous piece, I wanted to provide more information on a bankruptcy's effect on your credit score. Your credit score is only affected by Chapter 7 and Chapter 13 personal bankruptcies. If your company is involved in a Chapter 7 or Chapter 11 corporate bankruptcy, it will not affect your credit at all--it will only affect that of your corporation.
This is the reason why people who are self-employed often incorporate. It is best to keep your personal finances separate from your company finances. Often, people pay themselves a salary under their own corporation so that if something happens to the company, that will be hurt but not personal credit.
Ultimately, bankruptcy is something to avoid on a personal level, but on a corporate level, it happens everyday.